Despite a challenging summer for retailers, and some high-profile casualties, M&A activity in the UK retail sector has continued to provide some comfort – especially the number of transactions that have arisen outside of insolvency. Whilst distressed sales are likely to remain a sector reality for the near future, the level of such sales is down in comparison to 2022. Private equity activity in the sector remains muted, however there has been a steady stream of strategic acquisitions and divestments from stronger industry buyers.
According to recent figures from law firm RPC, Q1 2023 showed a 23% annual increase in M&A activity in the UK retail sector, but a 17% decrease in those resulting from distressed sales in comparison to 2022. GlobalData’s 2023 report on M&A transactions in the global apparel sector suggests a similar trend of increased activity, with Q2 2023 recording 41% more deals than Q1, and 39% more deals than the same quarter in the previous year.
Since the COVID-19 pandemic, distressed retail sales have flooded the headlines, and 2023 has been no exception with the high profile acquisitions of Joules, Cath Kidston and Matalan. However, recent transactional activity also suggests that more robust fashion brands and retailers are seeking longer-term solutions to a changing marketplace and stretched balance sheets, increasing their profitability through the acquisition of more robust businesses, or bolstering efficiencies by disposing of non-core assets. Retailers looking to sell shouldn't see rising interest rates and falling consumer spending as an inevitable barrier to transactions, but rather they may wish to focus their attentions on strategic acquirers and the synergies or market opportunities they can offer them.